Cuts in rooms and meals, taxes on communications? They don’t seem to be coming

The odds are not good that the NH Legislature will reduce the room and meal tax soon, no matter what happens in the next election, given the recommendation of the outgoing House Ways and Means Committee. The abolition of the tax on communication services does not seem very useful either.

House Bill 1204 would reduce the tax on rooms, meals, and car rentals from 8.5% to 7.9%, and also increase the share that cities and towns get, from 30% to 40%. The state’s Department of Tax Administration estimates the tax cut would save customers (and cost the state) nearly $22 million annually. It would also cost restaurants, hotels, and car rental companies, since they collect a percentage of the tax collected, although their trade association, the NH Lodging and Restaurant Association, has generally supported such tax cuts since the expected increase in business would outweigh the lost revenue.

The additional municipal revenues would offset the effects of the tax cut, but would provide a double whammy to the state: $45 million per year hit from the general fund.

Rep. Patrick Abrami, R-Stratham, noted that the Legislature cut many taxes (including a 9-8.5% reduction in room and meal tax) last year.

While the predicted revenue impact hasn’t materialized, that’s because so much federal money “keeps coming out,” he said. Abrami called for any potential tax cuts to be considered in next year’s budget process, and not kept alive as a separate bill.

The committee unanimously agreed not to recommend the bill for future legislation.

There were similar concerns about the HB 1500, which would eliminate the Communications Services Tax in three years, costing the state $39.6 million a year by 2026. Proponents said it was anyway from a decreasing pot, because people are switching to cell phones and the Internet. services. They also said it was regressive because it’s the same regardless of the payer’s income. Still, the amount of lost revenue is disheartening, and the committee decided to recommend its demise as well in a 16-3 vote.

Rep. Edith Tucker, D-Randolph, noted that New Hampshire is able to avoid broad-based taxes because of narrower ones.

“Before we start eliminating all these small revenue streams,” she said, lawmakers should look at “how we can get by without sales and income tax,” she said. She also noted that various swabs are “really a plus.”

The reason this lame duck committee is voting on these bills is that they were referred to interim consideration in the last session. It will be up to the future legislature – elected in November – to follow up next year. Still, the overwhelming bipartisan vote to drop them both indicates the prospect of either is remote.